$17m in NZ revenue for Distribution Central

After logging its most profitable quarter ever, Distribution Central is promising to pump the local profits back into the New Zealand operations, including increased focus on its Aruba and NetApp distributions.

While Nick Verykios, Distribution Central managing director, isn't disclosing figures for Q1, he says it was 'our most profitable quarter ever – ever!'

The distributor, which hit the news in Australia recently after sales topped $250 million for FY13, reported sales revenue of $17.2 million in New Zealand in the financial year ending June 30, 2013, up from $6.8 million the year before.

Verykios attributes the local growth at least in part to its exclusive distribution agreement for NetApp, picked up in September 2012.

“It was a signficant contributor [for FY13] and I'm particularly pleased with our first quarter this financial year – it's showing that NetApp should be over half our business.”

The distributor recorded gross profit of $1.5 million, reducing after taxes and expenses to $129,692.

“When you see the New Zealand accounts, there is quite a substantial profit left over,” says Verykios. “That's not for any other reason than we haven't spent it yet. We will spend it this year.”

Verykios says the company has invested heavily in the past three years, and that's now showing in the company's assets.

“We invested significant dollars in the iAsset tool which we've now spun off into its own entity and we've been in the US selling its technology to other distributors. A lot of investment went into transitioning our ERP system to be able to handle a quarter of a billion dollar plus organisation and to handle our front end. And we put a lot of money into our configuration engines, which are a big value add for us, and into our billing engines for cloud strategy.”

Locally, the company has invested in new offices with a focus on the knowledge centre, along with investment in Wellington, predominantly in the form of additional engineers. Distribution Central now has two Wellington staff, with a third about to be added, and six staff in Auckland – with another two to be added there.

The coming months will see Distribution Central 'pouring some money' into Aruba in New Zealand. After being 'informally' a distributor here thanks to their Australian distribution deal, the company officially became a distributor alongside Wescon and Connector Systems recently, with Verykios promising it will be taking 'a major crack at Aruba'.

“We're going to do a lot of channel training but also sales solutions training, because they've got some significant uniqueness about them, particularly in line with their guest-based management. They are also the only wireless AP that is Lync certified, so we've got a Microsoft play that we're investing in. We're going to have fun with that,” he says.

“We've had significant success with them in Australia and I have no doubt we'll have the same success with them here now we have turned the engine on,” Verykios adds.

Verykios says 63% of the company's revenue across Australia and New Zealand comes from exclusive relationships, like the deal with NetApp. Locally the company also has an exclusive deal with Quantum, while in Australia, NetApp, BlueCoat and Sophos, along with several smaller vendors, are exclusive to Distribution Central.

He says several other vendors are looking at the exclusive distribution, particularly in the wake of the success the company has had with NetApp.

“The question is what can you [as a distributor] do if you don't have to watch your back?,” Verykios says. “You become the channel extension of the vendor.”

He says in the vast majority of instances where a vendor added a new distributor in addition to Distribution Central, it was because a multinational had rights to the brand on a global scale, but wouldn't execute locally until they saw critical mass.

“Then they will execute on their contract and just go after your share.”

He says the industry has seen 'some pretty significant changes', to avoid that, with the likes of F5 extending deal registration to distributors, while other companies, such as Riverbed, have introduced value-based pricing.

“So the base price for a distributor is X but if you do this, this, this, you get additional discount. So if you do get shopped after you've done all the work with a reseller to win a deal, the competitive pricing from the other distributor is no where near yours, so you're still competitive, regardless.”

Verykios says while there are no immediate plans to add new brands to their porfolio, 'we have to' in future.

“With the investments we've made in infrastructure, it affords us the capacity now. The last few years have afforded us the capacity to really grow substantially again. And that's going to happen organically a bit, but it's going to happen with new brand acquisitions a lot.”